Stocks moved higher again on Thursday with all four indices opening higher and remaining in positive territory throughout the day. Investors seemed to relieved after the unrest in Washington yesterday and Congress certifying the election.

The Nasdaq led the way yesterday with a gain of 2.56%. The Russell jumped 1.89% and the S&P moved up 1.48%. The Dow lagged the other three, but it still gained 0.69%.

Once again we saw eight of the 10 sectors gain ground on the day. The tech sector led the way on Thursday with a gain of 2.7% and it was followed by the consumer discretionary sector which jumped 1.97%.

The utilities sector fell 1.36% as the worst performer and it was joined in negative territory by the consumer staples sector which lost 0.30%.

My scans flipped to a positive reading last night with 23 bullish signals and 13 bearish signals.

The barometer moved up to -5.5 after a reading of -15.6 on Wednesday.

Today’s trade idea comes from the bullish list and the subject company is Paychex (Nasdaq: PAYX). The company scores well with its fundamental ratings with an EPS rating of 75 and an SMR rating of 75.

We see how the stock has been trending higher over the last five months with a trend channel defining the various cycles. The stock just hit the lower rail of the channel and it is hovering near the 50-day moving average. The stochastic indicators hit oversold territory for the first time since June on the recent pullback.

Buy to open the February 90-strike calls on PAYX at $3.80 or better. These options expire on February 19, 2021. I suggest a target gain of 100% and that means the stock will need to reach $97.60. The stock hit $99.95 in December, so it won’t have to break through that potential resistance to hit our target. I recommend a stop at $89.45.

— Rick Pendergraft

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